Shares of cable and wire companies took a hit on Thursday, with some plunging as much as 21 per cent, following UltraTech Cement’s announcement of its foray into the sector. This sell-off occurred despite the benchmark indices closing flat, with the Nifty ending at 22,545.05, down 0.01 per cent, and the Sensex closing at 74,612.43, up 0.01 per cent.
The most significant impact was seen on KEI Industries, which tumbled 21.30 per cent to close at ₹2,989, while RR Kabel dropped 19.68 per cent to ₹892. The market leader, Polycab India, saw a decline of 18.88 per cent to ₹4,677, and Finolex Cables fell 6.22 per cent to ₹839.95. UltraTech Cement’s shares also ended 4.69 per cent lower at ₹10,450.
The market reacted strongly to UltraTech Cement’s announcement on February 25 regarding its approval of a ₹1,800 crore capital expenditure plan to enter the wires and cables segment. The company plans to establish a manufacturing plant near Bharuch in Gujarat, which is expected to be operational by December 2026.
Kumar Mangalam Birla, Chairman of the Aditya Birla Group, stated in a press release, “We intend to expand our presence in the construction value chain through our foray in the cables and wires segment, which aligns with our vision of providing comprehensive solutions to our end customers in the construction sector.”
Experts believe that the market’s reaction may have been excessive, considering that UltraTech’s plant will only be operational by late 2026.
When a major player with a strong brand, supply chain, and distribution network enters a business, the margins of existing players are likely to be impacted, according to Kranthi Bathini, Director of Equity Strategy at WealthMills Securities. However, he noted that predicting the impact and target segment of UltraTech’s entry at this stage is premature.
The cable and wires industry has been growing at a CAGR of around 13 per cent between FY19 and FY24, with a shift from unorganised to organised players. The market is also facing challenges such as rising raw material costs and intense competition.
Although UltraTech’s entry is not expected to affect the earnings of cable and wire companies in the short term, analysts anticipate potential consolidation in the long run, which could drive unorganised players out of the market.
Market analysts draw parallels between this situation and previous disruptions in other sectors, such as the entry of Jio in the telecom industry. The industry is undergoing significant expansion, with major players planning substantial capex in the coming years.
In conclusion, the impact of UltraTech’s entry into the wires and cables segment remains to be seen, and the industry may witness significant changes in the future as a result of this development.
